Local News

Governor's PERA plan a curveball in looming fight

Whether it will hurt or help reforms pass remains to be seen

By Brian Eason

The Denver Post

Posted:
11/05/2017 09:27:49 PM MST

When the Colorado Public Employees' Retirement Association in September crafted its plan to shore up the retirement fund's $32 billion unfunded liability, its board of directors sent a near-unanimous message: To navigate the politically treacherous waters of pension reform requires nothing short of "shared sacrifice" from taxpayers, employees and retirees.

Last week, Gov. John Hickenlooper sent a message of his own: Taxpayers have already sacrificed enough.

"I took the partisan politics off the table and I tried to look at the long-term stability of PERA," Hickenlooper told The Denver Post. "This seemed to me to be the way to make it as fair as possible."

The Democratic governor's PERA policy announcement last week caught many on both sides by surprise, drawing praise from conservatives, and leaving the left largely silent, as union and retiree advocates scrambled to educate their members on what the latest proposal would mean for them.

In short, the governor's version would nix PERA's proposed increase to government contributions, replacing it with a larger cut to retiree cost-of-living raises, which would drop to 1.25 percent a year from 2 percent today.

For current employees, the governor's plan is a mixed bag. Their contributions would increase by two percentage points, instead of the three percentage points backed by the board. But many would lose retirement benefits in the future unless higher cost-of-living raises were restored.

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In a Friday interview, Hickenlooper said today's public workers and the government agencies that employ them are getting a bad deal that's making it increasingly difficult for the government to compete with the private sector for talent.

Most state agencies, school districts and other governments represented by PERA today are required to contribute 20.15 percent of an employee's salary — some of which came directly from employee raises. Most employees contribute another 8 percent of their pay on top of that.

"They (employers and employees) are both getting a worse deal than anyone in the private sector," Hickenlooper said. "And retirees are getting more than twice as good (a deal) as anyone in the private sector."

Once the pension's finances recover, Hickenlooper added, retiree cost of living raises should be the first thing restored.

As for PERA, executive director Greg Smith at a Thursday town hall took a diplomatic approach, saying he was encouraged that the governor's plan meets the board's goal of full funding within 30 years — even if he took a different route to get there.

On Friday, board chairman Timothy O'Brien, too, said he was "delighted" the governor had made PERA funding a priority. But he stuck by the board's plan as preferable to Hickenlooper's approach: "I think the shared sacrifice is the right way to go. I don't know how the General Assembly will see that."

It remains to be seen if Hickenlooper's position will help or harm the chances of reform passing in a politically charged election year.

With Hickenlooper taking a more conservative stance, the Republican-led Senate may have political cover to take a harder line in negotiations. And if taxpayer contributions are harder to come by, public sector unions — a major Democratic campaign donor — may ramp up the pressure on lawmakers to kill this attempt and roll the dice on a more friendly political climate in 2019.

Another wild card is state treasurer Walker Stapleton — a leading Republican candidate for governor, who for years has tried to sound the alarm about PERA's financial state. Many conservative lawmakers may look to him to guide the GOP response.

On Friday, Stapleton said he was "pleasantly surprised" by the governor's proposal, but said it doesn't go far enough. He believes PERA still relies on overly optimistic investment assumptions, now set at 7.25 percent a year.

"I hope that this stops their proposal dead in its tracks," Stapleton said.

Much like last session's major battles over transportation and a state hospital fee, the Senate Finance Committee is likely to be the linchpin of any proposal. Its three Republican members for years have pushed for conservative pension reforms that would cap taxpayer spending, diminish the influence of unions on the board of directors and offer all public employees the option of switching to a 401(k)-style defined contribution plan.

But two of its Republican members — Sens. Owen Hill and Jack Tate — also supported a PERA-backed proposal last year to shore up the judicial fund with increased contributions.

Tate on Friday said he's already working across the aisle to mediate a solution, and declined to take a firm stance in light of those negotiations.

"I'm very serious about trying to get something done," Tate said. "There's a significant cost of waiting. For each year we wait without a reform, the magnitude of the liability that's underfunded grows."

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